A new commentary by the Conference Board of Canada is reigniting a debate over just how much influence China’s economy has over Metro Vancouver’s housing market.

Robin Wiebe, a senior economist with the Centre for Municipal Studies in Ottawa, offers the assessment in a column published by the Conference Board, warning that expectations of a slowing Chinese economy “could be considered as big a drag on the Vancouver housing market going forward as anything else, including the city’s notoriously poor affordability.”

Wiebe’s view is that Vancouver’s housing market has historically followed Chinese growth, with the accelerating Chinese economy over the past decade accompanied by surging Vancouver price increases.

“There is a clear correlation between Chinese immigration and real estate activity in Vancouver,” Wiebe said in his column. “In fact, the Chinese immigration peak of 2005 was matched by a peak in existing home sales in that same year. The 42,000 resale transactions that year were nearly 50 per cent above the previous decade’s average and remain a record high for this market.”

Similarly, Wiebe said the pendulum is now swinging the other way with a slowing Vancouver housing market coinciding with reports that China’s economy is cooling.

However, Cameron Muir, chief economist for the B.C. Real Estate Association, said that immigration from China has a far greater effect on Metro Vancouver real estate than foreign investors, and he doesn’t see the local market being greatly affected by a slowing Chinese economy.

“The vast majority of sales are generated by people who live, work and raise families here,” said Muir. “A [Chinese] slowdown might translate into some weakness, but foreign investors account for just a small percentage of sales.”

However, Muir noted that a slowdown might have some impact on areas that wealthy Chinese investors prefer, like Vancouver’s west side or Richmond.

The latest Real Estate Board of Greater Vancouver survey indicates that the number of residential property sales in Metro Vancouver hit a 10-year low in June.

The report noted that Vancouver’s west side, for instance, saw 769 single-detached homes sell in the first six months of 2012, down substantially from the 1,310 that sold there in the red-hot first half of 2011, while Richmond, another of 2011’s Metro Vancouver’s hot spots, saw 603 single-detached sales from January to June compared with 1,111 for the same period of 2011.

Wiebe added in an interview that there are “wealth spillovers” from China around the Pacific Rim, including Vancouver, as the wealthy diversify their assets away from Chinese real estate.

But it’s not just investors who are affected by changing fortunes, he noted, as Chinese immigrants to Canada also have less money to spend on housing locally when China’s economy falters.

He said the financial crisis of 2008 was hard on both Chinese growth and Vancouver house prices, but by 2010 both were once again in double-digits.

Wiebe noted that offshore investors do not need to live in Canada to own a property in Vancouver and it is possible to arrange property management by a professional or a family member.

“Accordingly, Chinese wealth probably has a larger affect on the Vancouver housing market than immigration numbers alone suggest, since Chinese investors can buy homes here while remaining there.”

Wiebe noted that China is typically the largest source of immigrants to Vancouver, accounting for nearly a quarter of all arrivals in 2010.

“These immigrants need a home and have supported housing demand growth in British Columbia for several years. Some come to B.C. with a significant amount of wealth and, thus, a strong appetite to invest in the housing market.

“Catering to Chinese residential demand is big business out here; the Chinese Real Estate Professionals Association of BC lists over 200 members on its website.”

Source: Brian Morton, Vancouver Sun

The Real Estate Board of Greater Vancouver (REBGV) is heralding a buyer’s market in Vancouver, but if prices are still going up, how can this be true?

The following is part of an article written by Harvey Enchin for the Vancouver Sun:

A buyer’s market is loosely defined as a market condition in which supply exceeds demand.

So, the REBGV was technically correct in declaring Vancouver a buyer’s market this week. Sales of houses, townhomes and apartments dropped 27.6 per cent last month to 2,362, units from 3,262 in June 2011.

While it may be true that buyers were presented with more choice and faced fewer rival bidders than a year ago, the fact that sales volumes were down is meaningless without an accompanying downward adjustment in price. And that hasn’t happened.

Metro Vancouver prices were up on average by 2.6 per cent from January to June, while West Vancouver and Whistler were up 7.1 per cent. In fact, the benchmark price for a detached home in Vancouver is up 3.3 per cent from a year ago to $961,600, or roughly 14 times the annual median household income. The average ratio of house prices to median income in Canada at the start of 2012 was 4.6 times.

Just because the real estate industry has heralded a buyer’s market, doesn’t mean it’s time to buy.

CREA’s forecast earlier this year called for a slight dip in property prices in 2012 — which is looking increasingly unlikely — and a rebound in 2013. However, TD Bank sees a price decline of up to 15 per cent over the next two to three years.

Academics who specialize in real estate finance — namely Tsur Somerville at the University of British Columbia and Andrey Pavlov at Simon Fraser University — are on record saying price changes won’t happen overnight. It might take six months for sellers to lower their expectations. Neither deigned to declare the current state of affairs a buyer’s market.

Eventually, tighter mortgage rules, high household debt, rising interest rates, overbuilding of condominiums and townhomes, and a slowdown in offshore investment will begin to bite and prices should start to decline.

The economic model of supply and demand is supposed to be a determinant of price, so unless practitioners of the dismal science have got it all wrong, the price of real estate — even in Vancouver — should soften sooner or later. Probably later.

One can understand the real estate industry’s hope for a buyer’s market — its members need sales to earn a living. But existing conditions in Vancouver, and other places in B.C., constitute a buyer’s market only if money is no object.

Source: Harvey Enchin, Vancouver Sun

The number of residential property sales has hit a 10-year low in Metro Vancouver leading the Real Estate Board of Greater Vancouver to declare a buyer’s market.

The announcement is significant since the board has in recent months been calling the market “balanced.”

According to the board’s June report, sales of houses and apartments dropped to 2,362 last month, a 27.6 per cent decline compared with 3,262 sales in June 2011, and a 17.2 per cent drop over the previous month of May.

“Overall conditions have trended in favour of buyers in our marketplace in recent months,” said Eugene Klein, the board’s president, in a news release today.

“This means buyers are facing less competition and have more selection to choose from compared to earlier in the year.”

June sales were the lowest total for the month in the region since 2000 and 32.2 per cent below the 10-year June sales average of 3,484, the report shows.

New listings for detached, attached and apartment properties totaled 5,617 in June, a three per cent drop from the year before and an 18.9 per cent decline compared with the 6,927 new listings reported in May 2012.

“Today, our sales-to-active-listings ratio sits at 13 per cent, which puts us in the lower end of a balanced market,” said Klein.

He said the ratio has been declining in the market since March when it was 19 per cent.

The benchmark price for detached properties increased 3.3 per cent from June 2011 to $961,600, while apartments increased 0.3 per cent to $376,200.

Source: Tiffany Crawford, Vancouver Sun

Vancouver’s new housing affordability initiative may have the effect of increasing the value of single detached homes, while providing a moderating influence on prices for condos and townhomes, according to Tsur Somerville, director, Centre for Urban Economics and Real Estate, Sauder School of Business at the University of B.C.

“If this is successful, I’d expect higher single family prices than they’d be otherwise,” said Somerville Monday of the plan, which will see the city become more involved in the housing development business.

Somerville said there are already pressures to convert single family homes into denser types of housing, and that those pressures should increase under the plan.

The city’s housing initiative, he said, proposes reducing development costs and red tape to augment denser housing projects, which would result in “more applications to rezone existing single family sites along major arterials.

“You’ll redevelop more single family [land] into condos, which increases [single family] land prices and reduces the supply of single-family homes. There’d be fewer single-family homes, so they’d be worth more.”

However, Somerville believes the policy might also have a moderating effect on overall prices for townhomes and condos in Vancouver, because the supply of high-density housing would increase as average rents drop. “If rents fall, the rental value is lower for an investor, so they’ll pay lower prices. And if we build more condos and townhomes, there will be more supply and prices will moderate.”

However, the chief economist for the B.C. Real Estate Association believes the new housing policy won’t have much of an effect on overall home values in Vancouver.

“It will help increase the stock of affordable housing for lower income households,” said Cameron Muir, noting that high-density housing tends to be less expensive. “But [for overall price levels in the city] I would expect that it would be negligible.”

Source: Brian Morton, Vancouver Sun

Vancouver is building on its reputation as a city of glass and steel.

Look around the skyline and you’ll see it dotted by cranes, and everywhere there seems to be another hole in the ground making way for another apartment building.

Sixteen condo towers are under construction, according to a database by Skyscraperpage.com and another 67 proposed high-rises are in the works.

Amid newly-tightened mortgage rules and concerns of an over-supply in the Toronto condo market that prompted financial authorities including Bank of Canada governor Mark Carney to sound an alarm this week, we think we’ve earned the right to ask: Is Vancouver oversaturated with condos?

Housing starts in Vancouver are up in the first five months of 2012 compared to the same period last year, driven largely by multiple-unit dwelling construction – which is up by about 50 per cent from last year.

According to the Canada Mortgage and Housing Corporation, 5,503 condo units are under construction in Vancouver in April, adding to the existing 230,000 units already in the city.

B.C. Real Estate Board economist Cameron Muir says the short answer to our question is no.

“Prices have been pretty flat since 2009,” Muir said. “There’s ample supply in the market place, but we are seeing prices at a steady pace.”

The fact more condos than single-detached homes are being built in Greater Vancouver is nothing new, said Muir, as condo starts have consistently made up about 75 per cent of all housing starts in the last several years. “It’s a function of land supply.”

Consumer demand during the last several months is trending on a 10 to 15 year average, he added.

One indicator, says Muir, of the demand-and-supply balance in the marketplace is the sales-to-new-listings ratio.

In Vancouver last month, the ratio, at 15.3 per cent, inched closer to a buyer’s market — but sits within the balanced range of between 15 to 20 per cent.

There hasn’t been a sustained buyer’s market since the recession hit, between late 2008 to early 2009.

As of April, 504 recently-completed units remain unsold. Overall, 3,017 units are listed on MLS.

Is Vancouver over-supplied with condos? The market will let us know.

Here are some of the condos currently under construction in Vancouver:

1. Wall Centre False Creek I, II, III, IV

100 W. 1st Avenue

• 556 units in four towers

• Completion: Early to mid-2014

2. Maynards

1901 Wylie Street

• 253 units

• Completion: Fall 2012

3. James Living

289 W. 2nd Avenue

• 155 units

• Completion: August 2012

4. The Mark

1372 Seymour Street (at Pacific Boulevard)

• 300 units

• At 41 storeys, it is billed as the tallest tower in Yaletown

• Completion: Summer 2013

5. Salt

1308 Hornby Street

• 199 units

• Completion: June 2014

6. Cosmo

161 W. Georgia Street

• 253 units

• Status: Move-in ready

7. The Rolston

1300 Granville Street (site of the old Cecil Hotel)

• 187 units

• Completion: June 2013

8. Maddox

1304 Howe Street

• 214 units

• Completion: December 2013

9. Uptown

2788 Prince Edward

• 100 units

• Completion: Fall 2012

10. TELUS Garden

775 Richards Street

• 428 units in a 53-storey tower, which will be the second-tallest in the city after the Shangri-La

• Completion: 2015

11. Marine Gateway

8400 Cambie Street

• 415 units in two towers

• Completion: 2015

12. 1153 West Georgia Formerly the Ritz Carlton

• 290 units (but should be confirmed independently, based on CBC report)

• Completion: XXX

13. Wall Centre Central Park Boundary Road and Vanness Avenue

1,114 units in three towers

Status: Rezoning application approved. Completion date: XX

TOTAL: 4,464

Here are some proposed developments:

1. Rize Mount Pleasant

Kingsway and Broadway

241 units

Status: Rezoning proposal approved by city council in April. If approved, completion date of XX.

2. Burrard Gateway

1290 Burrard Street (and 1281 Hornby Street)

About 589 units in two towers

Status: Proposed, awaiting rezoning approval. If approved, completion date of 2015 to 2016

Source: GlobalNews. A division of Shaw Media Inc., 2012

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Greater Vancouver housing sales hit a 10-year low in May, dragged down by plunging sales of high-priced homes in West Vancouver, Richmond, and on Vancouver’s pricey west side.

May sales figures show that detached-home sales fell 59 per cent in West Vancouver, 46 per cent on the west side of Vancouver, and 25 per cent in Richmond.

Overall sales of detached homes, townhouses and condos fell 15 per cent compared to 2011, making this the bleakest real-estate May since 2001.

Eugen Klein, president of the Real Estate Board of Greater Vancouver, said the year-to-year comparisons in areas such as West Vancouver follow a frantic spring market in 2011 marked by bidding wars, multiple offers and homes selling well above the asking price.

“Last year we saw 228 detached homes sell in May on the west side of Vancouver – this year we’re looking at 115,” Klein told The Province. “Last year, there were pockets of heavy activity.”

Klein explained the drop followed a hot market in 2011, fuelled by prices that had continued to climb quickly year after year — a cycle Klein said had to end at some point.

“It’s a reality of the market – you can’t have double-digit increases forever,” he said. “We’re not seeing the large offers, and the multiple offers. Whether it’s foreign policy, I don’t know. It’s a stabilizing period.”

Klein puts a positive spin on the negative numbers, saying fewer sales and more listings mean that buyers can look around and haggle over price.

“People are talking all the time about affordability,” he said. “There’s more room to negotiate with sellers. That’s when you have better affordability.”

The overall 15-per-cent decline from May 2011 to May 2012 was nearly across the board — with a few notable exceptions, especially in (relatively) lower-priced regions where value and affordability are far better than the westernmost areas.

From May 2011 to May 2012, the following areas swam against the stream, showing increased sales:

* Detached homes: Whistler, Maple Ridge/Pitt Meadows, and Port Moody/Belcarra

* Apartments: Coquitlam, New Westminster, North Vancouver

* Townhomes: North Vancouver and Port Moody/Belcarra

The extensive REBGV study found overall that prices for all categories of homes were up 3.3 per cent, with each group having substantially different results:

* Detached-home sales fell 25 per cent, while detached-home prices rose 5 per cent.

* Apartment sales fell 6 per cent, with prices increasing 1.7 per cent.

* Townhouse sales fell 10 per cent, with townhouse prices falling 5.3 per cent.

Source: Ian Austin, The Province

This is my favourite quote of today “None of the places that build a lot are expensive. And none of the places that are expensive build a lot.”

Below is an interesting article that appeared in this weekend’s Vancouver Sun by Don Cayo on why our city needs more quality high-density housing.

Think globally and act locally?

Nonsense, sniffs Edward Glaeser, a Harvard University economics professor, a prolific author and a globally recognized authority on urban issues.

Glaeser has made his name, and he makes his living, documenting evidence that pokes holes in many of the myths about what it takes to live lightly on the planet.

And it turns out it has nothing to with trekking back to the land, or with building chicken coops or cultivating gardens on what ought to be high-density urban land.

Indeed, “Local environmentalism often turns into bad environmentalism,” he told me as we strolled busy streets from former mayor Sam Sullivan’s first Vancouver Urban Forum in the Playhouse Theatre to a downtown radio interview.

“The key is not to ask about the footprint of the person in Vancouver. Rather, it’s about what has Vancouver done to lower the footprint of the world.”

What we have done – though not enough of – is live close together in a place that is packed not only with people, but also with amenities that make life pleasant.

Glaeser has been to this city before, and he’s a fan of Vancouver, though he admits that really he knows only its downtown core and the area around the University of B.C.

But that’s enough for him to proclaim to the Playhouse audience that this city stands “as a model to the world.”

Which is not to say he has no ideas to make it better.

Glaeser’s main thesis is summed up in the title of his most recent book, Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier. The book documents how innovative and entrepreneurial cities – as opposed to the dying industrial cities like those of the U.S. Rust Belt – are substantially ahead of other areas in all measures of quality of life, and they have a much smaller impact on the environment.

“If the environmental footprint of the average suburban home is a size 15 hiking boot, the environmental footprint of a New York apartment is a stiletto-heel size 6 Jimmy Choo,” he observes in the book.

So what Vancouver has begun to attain, but needs more of, is high-quality density. And this means, among other things, housing that’s affordable to the full range of citizens who might like to live here.

His recipe is simple: build more homes.

In his extensive studies in the U.S., he said, “None of the places that build a lot are expensive. And none of the places that are expensive build a lot.”

Building more means dealing with some sensitive issues – NIMBYISM, a faddish affection for urban agriculture, even heritage preservation.

He even dares to take issue with perhaps the most influential urbanist of her day, Jane Jacobs – a writer and thinker who, for the most part, he admires greatly, as do I.

“But she did make a mistake when she looked at old buildings and new buildings”, he said.

Jacobs concluded that, because old buildings were cheaper to live in than new ones, they should be preserved for affordable housing.

“But this isn’t how supply and demand works. We’re not promoting affordability when we freeze cities in amber,” he argues.

In conversation, Glaeser used the counter-intuitive example of Yaletown’s pricey towers as construction that enhances a city’s affordability.

“Beautiful green glass towers are expensive to put up, and they’ll never be an affordable housing option. But by building green glass towers, we limit the push to gentrify middleincome areas. So creating supply in one area eases demand in another.”

And vice versa when we limit density through stultifying regulations or by crowding it out with low-density uses.

We may fool ourselves into thinking we are doing good for the environment, but we’re pushing other would-be residents out of the city and into places where their presence creates a much larger impact.

“We are an extremely destructive species,” Glaeser said, recounting how Henry David Thoreau, revered today as an early environmentalist who chronicled the good life on Walden Pond, enraged his neighbours when he inadvertently burned down a large tract of forest.

“So if you love nature, often the best thing is to stay away from it.”

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Sales in the country’s most expensive housing market continue to fall, according to the latest data from the Real Estate Board of Greater Vancouver.

The group says there were 2,853 sales through the Multiple Listing Service in May, a 15.5% decline from a year earlier. May sales were the lowest for the month since 2001 and 21.1% below the 10-year May sales average.

The decline comes as supply continues to increase with 6,927 new listings in May, a 16.8% increase from a year earlier and a 14.4% jump from just a month ago. New listings for May were 15.3% above the 10-year average for the month.

Still, the board is preaching calm and says the sales to active listings ratio is 16% which is indicative of a balanced market. “Home sellers have outpaced buyers in recent months, however there continues to be an overall balance between supply and demand in the marketplace,” said Eugen Klein, president of REBGV.

The board’s benchmark price index for all residential properties in Greater Vancouver was $625,100 in May, a 3.3% increase from a year ago. Detached home prices jumped 5.1% from a year ago to $967,500, apartments increased 1.7% from a year ago to $379,700 and townhome property prices rose 0.9% in May from a year ago to $470,000.

However, using actual average prices instead of the index, average detached home prices are down 12.2% from a year ago, townhomes are down 0.2% and condominiums are off 1.1%.

Source: Garry Marr, Financial Post